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Financial markets reacted favorably after Federal Reserve (Fed) Chair Powell indicated that a 75-basis-point interest rate hike was off the table during Wednesday’s Federal Open Market Committee meeting press conference. The market euphoria ended as quickly as it started, with stocks giving back all of Wednesday’s gains and more by Thursday’s close. The S&P 500 Index finished lower for the fifth consecutive week while the 10-year Treasury yield moved above 3% for the first time since 2018.
This week’s inflation data takes on greater significance as investors are starting to doubt whether the Fed is willing to deliver the tough medicine necessary to rein in high inflation. The Consumer Price Index report will be released Wednesday, followed by the Producer Price Index on Thursday and finally the University of Michigan sentiment and inflation expectations coming out Friday. Market volatility is certain to remain elevated until investors can begin to see the light at the end of the tunnel on the inflation front.
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